7 things to know before opening a PPF account

The Public Provident Fund (PPF) is a savings scheme offered by the India Post, controlled by the Ministry of Communications, It offers customers to make regular deposits. Coming with a maturity period of 15 years, the PPF scheme offers tax deduction under Section 80C of the Income Tax Act and the deposit can start with minimal investment amounts.

The interest rates are set every quarter by the Ministry of Finance. For the first quarter of financial year 2021-22, the interest payable on a PPF is 7.10%.

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Here’s what you should know before opening a PPF account:

Minimum amount: A salaried or a self-employed individual can open a PPF account with a minimum deposit of Rs 100. A PPF account can be opened at any bank branch or through a post office, even of a minor child by their guardian or parents.

Deposit limit: An individual needs to make a minimum deposit of Rs 500 in a financial year. The maximum deposit is capped at Rs 1.5 lakh. The payments can be done in various installments, while not exceeding 12 in a financial year. (Now, multiple deposits can be made in a month too). If the minimum payment is not made, the account can be discontinued. However, it can be reactivated by paying the amount with subscription arrears.

Nomination facility: While opening the PPF account, or after opening it, an individual can nominate one or more persons in the account.

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Loans and withdrawals: An individual can avail a loan through his PPF account only after the completion of the third financial year from the year of opening an account. However, withdrawals can be done every year from the seventh fiscal year from the year of opening an account.

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Tax benefits: While the deductions are made under Section 80, the interest income is tax free and no tax is levied on the maturity amount. PPF is the best tax-saving investment in the country with its Exempt Investment, Exempt Return, Exempt Maturity or Withdrawal (EEE).

Premature closure: Closure of a PPF account is not allowed before 15 years. However, exceptions have been made on some specific grounds such as higher education or medical emergencies. But it cannot be closed before five years on any conditions.

PPF continuation: After completion of 15 years, an individual can further extend their PPF account, for any period in a block of five years. It can be done with or without a subscription, and the interest is given at the normal rate till the account is closed. However, withdrawal is allowed per annum only one during this time frame.

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A PPF account can be opened at various banks. However, not all banks give the facility of opening a PPF account and some do not provide the online facility. See the list of banks below offering opening of a PPF account:

Allahabad Bank (offers online facility)

Axis Bank (offers online facility)

Bank of Baroda

Bank of India (offers online facility)

Bank of Maharashtra

Canara Bank (offers online facility)

Central Bank of India (offers online facility)

Corporation Bank

Dena Bank

HDFC Bank (offers online facility)

ICICI Bank (offers online facility)

IDBI (offers online facility)

Indian Bank

Indian Overseas Bank

Oriental Bank of Commerce

Punjab National Bank

State Bank of India (offers online facility)

Syndicate Bank

Union Bank of India

United Bank of India

Vijaya Bank